GBPJPY: BoJ Discusses Future Plans (25th March)

Technical Analysis

• Current Policy Rate: 0.5% (Highest since 2008)
• Previous Hikes:
  • March 2024: Exit from ultra-loose stimulus.
  • July 2024: Rate increased to 0.25%.
  • January 2025: Rate increased to 0.5%.

Fundamental Factors Affecting the BOJ's Decision

1. Accommodative Financial Conditions Persist
   • Policymakers acknowledged that interest rates remain negative, even after the latest hike.
   • Further tightening remains an option if economic and price trends align with expectations.
2. Inflation and Wage Growth Trends
   • The BOJ revised its inflation outlook upwards, citing sustained wage growth.
   • Governor Kazuo Ueda emphasized rising food prices and substantial wage increases as key risks to watch.
3. Global Uncertainty and U.S. Tariffs
   • The BOJ is cautious about the economic impact of Trump's tariffs, which could disrupt global trade.
   • Further rate hikes will depend on how external risks unfold.

Key Takeaway for Traders

• Short-term: BOJ is unlikely to rush into another hike but will monitor inflation and global risks.
• Medium-term: Stronger wage growth and persistent domestic inflation could push the BOJ toward further tightening.
• Long-term: Traders should watch for signs of a shift away from accommodative policy as Japan adjusts to its post-stimulus monetary framework.

GBPJPY – D1 Timeframe

The onset of bearish momentum was set up by the bearish break of structure on the daily timeframe chart of GBPJPY, so we can describe the ongoing bullish movement as a retracement. The area of interest for the continuation of the bearish momentum is the rally-base-drop supply zone. The overlapping trendline resistance is an additional confluence favoring the bearish sentiment.

GBPJPY – H4 Timeframe

We realize on the 4-hour timeframe chart of GBPJPY that the highlighted daily timeframe supply was formed right around the 88% level of the Fibonacci retracement tool. Considering all other factors already discussed, price can be expected to react off the highlighted supply area.

Analyst's Expectations: 

Direction: Bearish

Target- 186.175

Invalidation- 199.725

CONCLUSION

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